Asia stocks rise as dismal China data spur hopes

Firm yen weighs Japan shares; Samsung restrains S. Korea market

V.Phani Kumar

HONG KONG (MarketWatch) — Most Asian markets rebounded from a weak start Monday as a sharp deterioration in Chinese manufacturing conditions fueled hopes that Beijing will act to support the economy, although a strengthened yen hurt Japanese shares.

“The Chinese government is definitely not going to sit aside,” said Peter Lai, a director at DBS Vickers in Hong Kong.

“I do believe that stability is of utmost importance to the Chinese government, and measures will be implemented after the 18th [Communist Party] Congress, supposed to be held in September or the fourth quarter this year,” Lai said.

Both markets had declined in the previous three trading days, and both opened lower on Monday after government data released by the China Federation of Logistics & Purchasing (CFLP) over the weekend showed the country’s manufacturing activity deteriorated in August.

A privately-compiled survey by HSBC released Monday also showed separately that business conditions for Chinese manufacturers weakened sharply in August from the preceding month. But the weak figures strengthened expectations for policy stimulus from the world’s second-largest economy. Read full story on China manufacturing data.

Also supporting sentiment, data released Monday by the CFLP showed China’s Purchasing Managers’ Index for the non-manufacturing sector improved to 56.3 in August, 0.7 percentage points higher than in the previous month.

DBS Vickers’ Lai said the non-manufacturing PMI was “very encouraging” and shows Beijing “knows how to control demand-supply in a flexible and targeted way.”

But Japan’s Nikkei Stock Average (100000018) finished 0.6% lower, unable to latch on to gains recorded earlier in the day.

The day’s gains followed an upbeat finish on Wall Street Friday, on expectation that the Federal Reserve was leaning towards further asset purchases. Some analysts pointed to U.S. nonfarm payrolls data due this Friday as a crucial data point that will shape the central bank’s intent to provide further monetary stimulus.

“We believe that the incoming data have taken a more positive tone and, barring a very weak reading in the August payroll report, should lead the Fed to refrain from initiating [the third round of quantitative easing] at its September meeting,” Barclays economist Michael Gapen wrote in a report.

Meanwhile, a Nikkei news report cited the Japanese conglomerate’s president as saying a final deal for an investment from Taiwan’s Hon Hai Precision Industry Co. (2317)
HNHPF, -3.27%
has been delayed due to questions about an overall Sharp-Hon Hai business alliance, rather than issues surrounding the prices. Read more on Sharp president’s comments.

Hong Kong students end hunger strike

(1:11)

Three Hong Kong students end their hunger strike over curriculum changes after 56 hours due to health concerns. Courtesy Reuters. Photo: Reuters.

Shares of Hon Hai rallied 6.1% in Taipei, while listed subsidiary Foxconn International Holdings Ltd. (2038)
FXCNF, -0.88%
added 4.5% in Hong Kong, after Hon Hai posted a 0.5% gain in first-half net profit from a year earlier despite booking a large loss on its investment in Sharp.

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